Finance 355: Investments QUIZ 1 Quiz Paper A 1, Quiz Paper B 16 Black Stone Mines stock returned 8, 16, -8, and 12 percent over the past four years, respectively. What is the geometric average return? a. 6.59 percent b. 7.36 percent c. 7.75 percent d. 9.94 percent e. 10.33 percent Quiz Paper A 2, Quiz Paper B 17 Asset allocation is the: a. selection of specific securities within a particular class or industry. b. division of a purchase price between a cash payment and a margin loan. c. division of a portfolio into short and long positions. d. distribution of investment funds among various broad asset classes. e. dividing of assets into those that are hypothecated and those that are not. Quiz Paper A 3, Quiz Paper B 18 Marti purchased 100 shares of Better Foods stock on margin at a price of $43 a share. The initial margin requirement is 60 percent and the maintenance margin is 30 percent. What is the lowest the stock price can go before Marti receives a margin call? a. $17.20 b. $22.36 c. $24.57 d. $26.18 e. $29.90 Quiz Paper A 4, Quiz Paper B 19 A stock has an average historical risk premium of 6.4 percent. The expected risk-free rate for next year is 2.6 percent. What is the expected rate of return on this stock for next year? a. 6.50 percent b. 8.86 percent c. 9.00 percent d. 9.34 percent e. 11.70 percent Quiz Paper A 5, Quiz Paper B 20 You purchase a stock at the beginning of the year for $76.20 a share. Your total return for the year was 12.6 percent and the dividend yield was 3.2 percent. What was the price of the stock at the end of the year? a. $69.65 b. $74.07 c. $83.36 d. $85.80 e. $89.22 Quiz Paper A 6, Quiz Paper B 11 Stacy purchased 500 shares of stock for $48 a share. She sold those shares six months later for $44 a share. The initial margin requirement is 80 percent and the maintenance margin is 40 percent. Ignore margin interest and trading costs. If she purchased the shares for cash her holding period return would be _____ percent as compared to _____ percent if she had used margin. a. -8.33; -10.34 b. -8.33; -10.42 c. -9.63; -11.30 d. -9.63; -12.54 e. -10.27; -12.82 Quiz Paper A 7, Quiz Paper B 12 Riverside Metals recently issued some debt that had an original maturity of nine months. This debt is best classified as a(n): a. option contract. b. money market instrument. c. fixed-income security. d. derivative security. e. futures contract. Quiz Paper A 8, Quiz Paper B 13 You short sold 500 shares of Jasper stock at $41 a share at an initial margin of 60 percent. What is the highest the stock price can go before you receive a margin call if the maintenance margin is 40 percent? a. $46.86 b. $47.08 c. $55.50 d. $56.90 e. $57.40 Quiz Paper A 9, Quiz Paper B 14 The variance measures the: a. total difference between the actual returns and the average return. b. average squared difference between the actual returns and the average return. c. total difference between the average squared returns and the risk-free return. d. average squared difference between the actual returns and the risk-free return. e. average difference between the actual squared returns and the risk-free return. Quiz Paper A 10, Quiz Paper B 15 A security originally sold by a business or government to raise money is called a(n): a. derivative. b. primary asset. c. primary debt. d. futures contract. e. option contract. Quiz Paper A 11, Quiz Paper B 6 The Latest Trend Fund has $2,648,900 in assets, and $1,878,400 in liabilities. How many shares are outstanding if the NAV is $10.07? a. 75,481 b. 76,514 c. 77,089 d. 79,142 e. 79,638 Quiz Paper A 12, Quiz Paper B 7 Suppose you have $10,000 to invest. Youre considering stock A, which is currently selling for $50 per share. You also notice that a call option with a $50 strike price and 3 months to maturity is available. The premium is $4. Stock A pays no dividends. What is your annualized return if you invest all your money in the call option if, in 3 months, stock A is selling for $55 per …
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